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    BABA
    Earnings call· Sep 2025(Q2 FY26)

    Alibaba Group Holding Ltd BABA

    Nov 25, 2025 Source

    Executive summary

    Alibaba Q2 FY26 — Strong Cloud & Quick Commerce Growth Amid Strategic Investments

    Alibaba delivered steady growth in Q2 FY26, driven by robust performance in its Cloud and China E-commerce segments, particularly from AI-related products and quick commerce. The company is in a significant investment phase, aggressively deploying capital into AI infrastructure and quick commerce to secure long-term market share, which has impacted short-term profitability and free cash flow. Management expects continued strong demand for AI and aims to integrate quick commerce deeper into its ecosystem, targeting RMB 1 trillion in GMV within three years.

    Highlights

    5

    • Total revenue increased 15% year-over-year (excluding Sun Art and Intime).

    • Alibaba Cloud revenue grew 34% year-over-year, with external customer revenue accelerating by 29%.

    • AI-related product revenue posted triple-digit year-over-year growth for the ninth consecutive quarter.

    • Quick commerce business saw significant improvement in unit economics, cutting per order UE loss by 50% compared to July/August.

    • AIDC achieved an adjusted EBITA profit of RMB 162 million, driven by logistics optimization and efficiency enhancement.

    Concerns

    4

    • Consolidated adjusted EBITA decreased 78% year-over-year due to strategic investments in quick commerce and AI infrastructure.

    • GAAP net income decreased 53% to RMB 20.6 billion, primarily due to lower income from operations.

    • Free cash flow was an outflow of RMB 21.8 billion, reflecting significant investments in quick commerce and AI plus cloud infrastructure.

    • Anticipated slowdown in China E-commerce CMR growth next quarter due to base effect from payment processing fees.

    Guidance & targets

    3
    CategoryTargetConfidence
    Quick Commerce GMV
    RMB 1 trillion
    high materiality
    High
    CapEx for AI infrastructure (3-year plan)
    Might be on the small side
    high materiality
    High
    CMR and EBITA
    Short-term fluctuations
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Alibaba China E-commerce Group
    Adjusted EBITA would have grown at mid-single-digit year-over-year excluding loss from quick commerce business. May fluctuate due to intense competition and user experience investments.
    Customer management revenue growth: 10%Quick commerce revenue growth: 60%
    		RMB 132.6 billion16%—RMB 10.5 billion (adjusted EBITA)
    AIDC
    Achieved profit due to logistics optimization and investment efficiency enhancement. Adjusted EBITA may fluctuate due to tactical investments in select markets.
    		—10%—RMB 162 million (adjusted EBITA profit)
    Cloud Intelligence Group
    Growth driven by public cloud and increasing adoption of AI-related products. Will continue to invest in customer growth and technology innovation.
    External customer revenue growth: 29%AI-related product revenue growth: triple-digitAI-related product revenue contribution to external revenue: >20%
    		—34%—9% (adjusted EBITA margin)
    All other segment
    Decrease mainly due to disposal of Sun Art and Intime businesses. Loss primarily due to increased investment in technology businesses, partly offset by improving operating results of other businesses (e.g., Hujing DME achieved profitability for 3 consecutive quarters).
    		—-25%—RMB 3.4 billion (adjusted EBITA loss)

    Operational metrics

    12
    Total revenue growth (excluding Sun Art and Intime)
    15%YoY
    Q2 FY26

    Like-for-like basis.

    Net cash
    USD 41 billion
    Q2 FY26

    Strong balance sheet backing reinvestment strategy.

    Quick commerce per order UE loss
    Cut by 50%Compared to July, August
    Since November

    Achieved through order mix optimization and economies of scale in logistics.

    Quick commerce non-beverage orders share
    Over 75%
    Most recently

    Contributed to higher average order value.

    Quick commerce AOV growth
    Double digitsCompared to August
    Most recently

    Contributed to increase in overall GMV share.

    Quick commerce average logistics cost per order
    Declined significantlyLower than before large-scale investments
    Q2 FY26

    Due to economies of scale from growing order volume.

    Tmall brands onboarded to quick commerce
    Approximately 3,500
    As of October 31

    Accelerating adoption of on-demand retail.

    Freshippo and Tmall Supermarket quick commerce orders
    Up 30%From August
    Q2 FY26

    Driving growth across related categories.

    Amap DAU
    360 millionHistorical high
    October 1
    Amap Street Stars DAU
    More than 70 million
    October

    Averaged more than 70 million daily active users.

    Amap Street Stars daily user reviews
    More than tripleSame period last year
    October

    Indicating strong future growth potential.

    Quick commerce channel on Taobao app daily users
    Over 100 millionRapidly increased
    Q2 FY26

    Considerable potential for monetization.

    Industry KPIs

    5
    MetricValueDetails
    Segment revenue mixRMB 132.6 billionRMB
    Ai cloud revenue backlog34%%
    Customer management revenue10%%
    Subscription membership program10 milliondownloads
    Operating income EBIT and adjusted EBITDARMB 10.5 billionRMB

    Product announcements

    4
    ProductTypeDetails
    Qwen applaunch
    Amap Street Stars featurelaunch
    AliExpress direct modelupdate
    Brand+ program (AliExpress)launch

    Deals & partnerships

    1
    NBA, Marriott, China UnionPay and BoschPartnerships with Alibaba Cloud on AI initiatives.

    These businesses have partnered with Alibaba Cloud on AI initiatives, indicating market adoption of Alibaba's AI capabilities.

    Risks & headwinds

    5
    Strategic investments in quick commerce and AI plus cloud infrastructureQ2 FY26, ongoing

    Decreased consolidated adjusted EBITA by 78% YoY; RMB 21.8 billion free cash flow outflow.

    Mitigation: Reinvesting free cash flow to create a winning quick commerce business and be a leader in AI, backed by USD 41 billion in net cash.

    Intense market competition in e-commerceOngoing, next quarter

    May cause short-term fluctuations in CMR and EBITA for Alibaba China E-commerce Group.

    Mitigation: Dynamically adjusting investment pace and size; decisively investing in consumers and merchants; resolutely moving ahead with business model upgrading.

    Base effect from payment processing feesStarting from next quarter (Q3 FY26)

    Expected slowdown in CMR growth for China E-commerce Group.

    Mitigation: Primary objective is to secure market share for the medium and long term through continued investment.

    Global undersupply of AI components and supply chain instabilityNext 2-3 years

    Pace of new server deployment insufficient to keep up with customer orders; expected to continue for 2-3 years.

    Mitigation: Working as fast as possible to satisfy customer demand; aggressively investing in AI infrastructure; prioritizing resource allocation to continually train foundation models and serve high-value use cases/customers.

    Tactical investments in select markets for AIDCOngoing

    May cause AIDC adjusted EBITA to fluctuate quarter-over-quarter.

    Mitigation: Continuing to enhance operating efficiency while making strategic investments.

    What to watch in Q3 FY26

    5

    Quick Commerce Unit Economics

    Next quarter
    CurrentPer order UE loss cut by 50% vs. July/August
    TargetContinued narrowing of UE losses and improved profitability

    Why it matters

    Indicates the effectiveness of strategic investments and path to sustainable profitability for a key growth driver.

    So on this basis, quick commerce has maintained stable order share with GMV share holding steady and trending upward. And we're also seeing a meaningful uplift in related physical e-commerce categories.

    Q&A highlights

    5

    What is the future growth trajectory for Alibaba Cloud, particularly for external revenue, and what are the primary demand drivers for AI in China?

    Management sees strong and accelerating AI demand, outpacing server deployment. Demand comes from all aspects of enterprise operations, deepening AI adoption across product development, manufacturing, and customer use. This requires significant compute, storage, and traditional cloud services, leading to strong conviction in future AI demand growth.

    “Certainly, we see that customer demand for AI is -- remains very strong. In fact, we're not even able to keep pace with the growth in customer demand as in orders in terms of the pace at which we can deploy new servers.”

    asked by Gary Yu · answered by Yongming Wu

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Focus on AI + Cloud and Consumption

    Alibaba is prioritizing investments in two core strategic pillars: AI plus cloud and consumption. This involves advancing both enterprise and consumer-focused AI, unlocking deeper synergies across its businesses, and driving long-term growth. The company aims to be a world-leading full-stack AI provider for enterprises and build native AI-first applications for consumers, leveraging its extensive ecosystem.

    02

    Alibaba Cloud's AI Leadership and Growth

    Alibaba Cloud demonstrated strong growth with a 34% revenue increase and 29% acceleration from external customers, driven by sustained demand for AI and public cloud. AI-related products continued their triple-digit growth for the ninth consecutive quarter, now accounting for over 20% of external customer revenue. The company is a clear leader in China's AI cloud market and is strengthening its full-stack AI capabilities, including its flagship Qwen3-Max model.

    03

    Quick Commerce Unit Economics and Ecosystem Integration

    The quick commerce business significantly improved its unit economics, cutting per-order losses by 50% compared to July/August. This was driven by an optimized order mix, with non-beverage orders now over 75%, and economies of scale in logistics. Quick commerce is also driving rapid growth in related retail categories like groceries and healthcare products, with a long-term goal of generating RMB 1 trillion in GMV within three years.

    04

    Investment Phase and Profitability Trade-offs

    Alibaba is in an aggressive investment phase for quick commerce and AI infrastructure, which resulted in a 78% decrease in consolidated adjusted EBITA and a RMB 21.8 billion free cash flow outflow. Management acknowledges that short-term fluctuations in CMR and EBITA are expected but emphasizes securing long-term market share and leadership in AI. The September quarter is anticipated to represent the peak investment scale for quick commerce.

    05

    AI Infrastructure CapEx and Supply Chain Constraints

    The company's previous 3-year CapEx plan of RMB 380 billion for AI infrastructure might be insufficient given the current strong customer demand, which is outpacing the pace of new server deployment. Management noted a global undersupply of AI components (fabs, DRAM, CPUs, GPUs) expected to persist for 2-3 years, indicating that AI resources will remain undersupplied with demand outstripping supply.

    06

    Consumer AI Initiatives and Ecosystem Synergy

    Alibaba launched the Qwen app, a personal AI assistant, which surpassed 10 million new downloads in its first week of public beta. This initiative aims to integrate AI into everyday life by leveraging Alibaba's extensive ecosystem, including e-commerce, map navigation, and local services, reinforcing the synergy between AI innovation and ecosystem collaboration for enhanced user value.

    AI-generated summary of the company’s earnings call. Not investment advice.